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Best equipment loans in February 2024

Dec 22, 2023
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If you run a business that needs large or expensive equipment, odds are you’ll need a business equipment loan. Heavy machinery and specialized equipment can cost far more than most businesses have in liquid funds. Luckily, equipment loans can offer reasonable interest rates and amounts all the way up to $5 million. 

Bankrate has amassed a list of the best business equipment loans. We’ve made sure to also include lenders that work with startups and business owners with bad credit. We selected the lenders based on loan requirements, unique features and availability across the U.S.

Compare the best equipment loans in February 2024

LENDER BEST FOR MIN. FICO CREDIT SCORE LOAN AMOUNT MIN. TIME IN BUSINESS
Creditfy Startups 500 Up to $10 million 6 months
Funding Circle Low revenue requirement 660 $25,000 to $500,000 2 years
SMB Compass Large amounts 600 $25,000 to $5 million 1 year
National Funding Equipment leasing 600 $10,000 to $150,000 2 years
Triton Capital Long preapproval period 600 $10,000 to $500,000 Startups eligible
Taycor Financial Flexible requirement 550 Up to $500 to $2 million Startups eligible
Bank of America Established businesses Not disclosed From $25,000 2 years
U.S. Bank Low down payment Not disclosed Up to $1 million Not stated
Balboa Capital Truck financing 620 Up to $500,000 1 year

A closer look at our top equipment loans

Creditfy: Best for startups

Overview: Creditfy offers loans and lines of credit with a low personal credit score requirement. It’s ideal for startups in part because you can apply if you have a FICO score as low as 500. Creditfy’s time in business requirement is six months, which also makes it easier for startups to be approved for funding. 

Why Creditfy is the best for startups:  Creditfy has a 90 percent approval rate for loans, and even new companies are likely to qualify if they have enough revenue. The company also has terms up to eight years. This can allow a startup to keep monthly payments low as they continue to grow their business. 

Who Creditfy is good for: Businesses with low personal credit scores may find Creditfy very appealing. It’s also good for brand new startups because the minimum time in business is just six months. You can receive approval in just a few hours and get funds within 24 to 48 hours.

Funding Circle: Best for low revenue requirement

Overview: Funding Circle has been around since 2010 with locations in Denver and London. It offers business term loans that you can use for equipment financing. 

Why Funding Circle term loan is best for low revenue requirement: Funding Circle has the lowest listed annual revenue requirement on the list at $50,000 per year. 

Who Funding Circle term loan is good for: Newer or smaller businesses that make less annually and may not qualify for an equipment-specific loan.

SMB Compass: Best for large amounts

Overview: SMB Compass states it has expertise in SBA, asset-based and equipment lending and has provided over $250 million to over 1,250 businesses. Its equipment financing loans are funded through partner lenders.

Why SMB Compass equipment financing is best for large amounts: SMB Compass’s equipment financing go all the way up to $5 million. But loan amount ranges also start at $25,000, making this a solid option for a wide range of loan uses. 

Who SMB Compass equipment financing is good for: Companies that need a high amount of funding, such as expanding larger factory locations or commercial vehicle fleets. 

National Funding: Best for equipment leasing

Overview: National Funding was founded in 1999 and lists itself as both a small business funding company and an equipment leasing company. It offers loans for any type of new or pre-owned equipment. 

Why National Funding is best for equipment leasing: A stand-out for National Funding is the Guaranteed Lowest Payment program for equipment leases. It also has no down payments required on new or pre-owned equipment leases. 

Who National Funding equipment leases is good for: Any company that wants to focus on leasing equipment, such as a transportation company that likes to replace vehicles every few years to keep the fleet updated. 

Triton Capital: Best for long preapproval period

Overview: Triton Capital, a loan marketplace, is based in San Diego and focuses on faster funding in as little as two days. Triton Capital offers a business equipment loan program with lasting pre-approval periods for if you need time to compare or access the equipment. 

Why Triton Capital equipment loan is best for long preapproval period: Triton’s pre-approval is good for 90 days, and that includes a rate lock for that time period. 

Who Triton Capital equipment loan is good for: Businesses that may need the time to shop around for loans or take time to secure specialty equipment or large fleets, like specialty manufacturers or large transportation companies.

Taycor Financial: Best for flexible requirements

Overview: Taycor Financial has offices in California and Utah and has been around for about 25 years. Taycor’s equipment financing helps newer businesses and startups access funding. 

Why Taycor Financial equipment financing is best for flexible requirements: Taycor works with startups if the owners have three or more years of related experience. Plus, there are no minimum annual revenue requirements for loans under $250,000. Minimum personal credit score requirements are also low at 550. 

Who Taycor Financial equipment financing is good for: Newer startups that need more leniency in requirements or established businesses with lower credit. 

Bank of America: Best for established businesses

Overview: Bank of America is a household name and, as the second-largest bank in the nation, has physical locations all across the country. It offers equipment financing and loans to established businesses. 

Why Bank of America equipment financing is best for established businesses: Bank of America’s high minimum loan amount and stiff qualification requirements mean this loan is best for well-established companies that need to make a large purchase. Though Bank of America doesn’t disclose its maximum interest rate, its starting rate is competitive.

Who Bank of America equipment financing is good for: Established businesses like manufacturers or trucking companies that have been in business for a couple of years and make a high amount of annual revenue.

U.S. Bank: Best for no down payment

Overview: U.S. Bank is the fifth largest bank in the United States based on total assets and is headquartered in Minneapolis. The bank has a wide variety of financial products that range from personal checking to business loans. Their equipment financing can be used for everything from medical equipment to commercial vehicles.

Why U.S. Bank equipment financing is best for no down payment: The minimum term required for no down payment with U.S. bank financing is just 24 months. You can avoid using capital to secure the loan and still enjoy a short-term loan for your equipment purchase. 

Who U.S. Bank equipment loan is good for: Businesses that have been in operation for at least two years and want to avoid spending their cash reserves on a down payment. 

Balboa Capital: Best for truck financing

Overview: Balboa Capital, a division of Ameris Bank, claims to have funded over $7 billion nationwide. It has programs that focus specifically on truck financing. 

Why Balboa Capital commercial truck financing is best for truck financing: If you’re looking to finance commercial trucks, Balboa’s flexible terms and same-day funds after approval make this lender an attractive choice. 

Who Balboa Capital commercial truck financing is good for: Any company that needs trucks, such as transportation companies, and has at least fair credit.

What is an equipment loan? 

Business equipment loans are generally a type of term loan that is used to purchase large-scale equipment for business use. Equipment loans might help with purchasing point-of-sale systems, commercial trucks, farming equipment, manufacturing machinery or medical devices. 

Most are secured loans with the equipment you purchase as collateral, meaning the lender can take the equipment if you do not make loan payments. Equipment loans lead to ownership of the equipment, unlike leases which allow you to finance equipment for a number of years before the equipment goes back to the lender. 

How does an equipment loan work? 

You apply like any other type of loan, but in the application, you usually have to specify the equipment you wish to finance. You then get a lump sum of money to acquire that equipment. Depending on the lender and your qualifications, your loan amount could be greater than the purchase price of the equipment to help you cover soft costs, such as delivery or installation. Or you might receive a percentage of the equipment's purchase price, leaving you to cover the rest.

You pay back the loan over the term with interest. The payment schedule can be weekly, monthly or even annually or semi-annually, depending on what the lender allows. Annual and semi-annual payments benefit businesses that make money seasonally, such as farms.

Requirements for an equipment loan 

Requirements vary by lender. Some work with startups, and others require at least two years in business. You may also see annual revenue requirements going from $50,000 to $250,000 or more. Personal credit score minimums often fall in the low to mid 600s, though some lenders will take credit scores in the 500s. 

You may also have to show other financial health indicators, such as no recent personal bankruptcies or showing enough cash flow to cover a percentage of the equipment. 

When you apply, you’ll have to provide common business documents like bank statements, tax returns, schedule of business debts and cash flow records.

Types of equipment loan 

There are several types of equipment business loans and leases, which we’ll cover below. 

Term loans

Term loans are dispersed in one lump sum and then paid back monthly over an agreed-upon term, often up to five years. Term loans have varying interest rates and origination fees. You can use a term loan for almost any purpose, including buying equipment. Make sure you pay attention to early repayment penalties. You don’t want to pay a fee if you’re able to resolve your loan sooner than later. 

SBA 7(a) loans

These SBA loans can help you purchase equipment or machinery. But they’re more flexible than dedicated equipment loans. SBA 7(a) loans can also fund a variety of other business purposes. If you need equipment and other funding for uses like inventory or working capital, you might want to look into this loan type. This loan type goes all the way up to $5 million.

Equipment financing

This is a common type that operates as a term loan, with one lump sum disbursed to cover the equipment cost. You pay it back with interest over the loan’s term. It’s a good option if you wish to own the equipment. But you often have to show strong financial health to acquire a loan with good rates. 

Equipment lease 

In a lease, you pay the lender for the use of equipment. You usually pay monthly on the lease for the set term. These can be positive in cases where you want the equipment for a limited time. For instance, a taxi company may not want to own a fleet of vehicles because wear and tear limit the vehicles’ lifespan. If you eventually want to own the equipment, leasing is not a good option unless your lease contract has a purchase option.

Business lines of credit

Business lines of credit are revolving lines of credit. You will have a draw period, during which you can take out money and purchase equipment, and then a repayment period. During the draw period, you can make multiple draws as long as you still have remaining credit available. You’ll only pay interest on the portion of the line that you have currently borrowed. You can also use this line of credit for other business expenses beyond your equipment should the need arise. 

Pros and cons of equipment loans 

To help you determine if equipment loans are right for you, below are some pros and cons to consider.

Pros:

  • You don't typically need additional collateral other than the semi truck.
  • Some lenders report payments to credit agencies, and you could boost your credit score.
  • Equipment loans can be a good way to access equipment you otherwise could not afford. Some people use the equipment to start businesses, expand operations and update old equipment.

Cons:

  • Equipment loan rates may be high, especially if you have a low credit score or limited time in business.
  • May require a down payment, which requires upfront cash that will take away from other spending needs. 
  • If the equipment fails within a few years, the loan could outlive the asset.
  • Most equipment loans use the equipment as collateral.

Who should get an equipment loan? 

Thanks to their relatively low rates, equipment loans are one of the best ways to purchase equipment you don’t have the liquid funds to buy outright.

Requirements are likely to include:

  • At least two years in business
  • A minimum annual revenue of anywhere between $50,000 and $250,000 or higher
  • A credit score in the good or excellent range
  • Proven cash flow

If you don’t meet these requirements, some lenders work with startups if you can prove personal financial health. 

You may not want to pursue an equipment loan just yet if your record shows a recent bankruptcy, have low annual revenue or a poor personal credit score. 

If you’re a new business and have doubts about your potential revenue, it may be wise to hold off until you have solid projections. Defaulting will damage your credit score and make getting another loan difficult. On the other hand, if you need certain equipment to operate your business, you may not have the option to wait.

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Bankrate Insight

While looking for equipment loans, you may run across scams or just bad contracts. Some red flags to watch out for include:

  • The lender demands you make a decision now without having time to consider everything.
  • The contract terms are vague, or you spot hidden fees.
  • You talk to the lender, and they are not forthcoming in answering questions.
  • Promises of guaranteed approval are fishy, as no reputable lender guarantees approval without review. 
  • When looking for equipment like trucks, you might run into dealership scams, which can use high-pressure sales tactics to push unfavorable loans with higher rates. 

Alternatives to equipment loans 

If you decide a business equipment loan isn’t for you, you can look into alternatives for equipment loans, some of which are even unsecured

Business credit cards 

Consider business credit cards if you can find one with a high enough limit or if the equipment you’re working to purchase is less expensive. Credit cards come with added perks like cash back and fuel points. 

Microloans 

You might look into microloans if you’re purchasing less-expensive equipment. SBA microloans go up to $50,000, for instance. You may also find options like peer-to-peer lending or crowdsourcing options for microloans, which can be good alternatives for smaller companies and startups that don't meet other lenders' requirements. Just know that interest rates are likely to be higher and terms shorter than equipment loans offer.

Grants

Grants are free money that doesn’t have to be paid back, but you will need to meet requirements and compete against other applicants. Grants are available at the local, state, and federal levels. Keep in mind that it can take time to apply and receive your funds so grants may not be a good option for immediate financial needs. Still, grants can be very niche and cater to your industry or be carved out for certain small business founders, including women and veterans. 

Semi-truck financing 

Some equipment loans take the form of semi-truck financing. These are set up to fund semi trucks specifically, so the loan amounts might be more in line with what new and used trucks are going for. Pre-approval may stay good for weeks and give you time to find the right truck. You might see drawbacks like higher rates because semi trucks can be a risk to finance. You may also face high down payment requirements.

Crowdfunding

Crowdfunding platforms let you run funding campaigns to gather money from potential customers. With most types of crowdfunding, you don’t have to repay the money, though you may have to offer other incentives to contributors. Plus, you don’t need to meet a creditworthiness threshold to launch a campaign. However, your success depends entirely on how much buzz you generate around your business. 

Where to get equipment loans 

Both traditional and online lenders offer business equipment loans.

Traditional lenders: These include banks and credit unions. Approval requirements tend to be stricter, although interest rates start lower than other lenders. But you can often have face-to-face assistance, and banks are more likely to help you build credit or graduate you to other lending options.

Online lenders: These may include online banks or fintechs. They tend to have less strict requirements since they focus on providing funding to companies that could not get funding elsewhere. But you lose that in-person banking experience.

How to manage an equipment loan 

Managing your business equipment loan after getting approved takes strategic thinking to ensure the loan payments fit your business budget. First, you want to read through the entire loan agreement to make sure you understand all the fees and responsibilities you have for the loan. For example, some loans come with prepayment penalties, so you’d need to weigh the benefits of paying off the loan early if there is a fee. 

You also want to keep detailed records of your updated revenue and expenses, including your loan payment, to make sure that your business is running in the green. Keeping your business budget updated also lets you adjust expenses as revenue rises and falls. Expenses can also include equipment maintenance and repairs, extending the life of your equipment to keep costs low.

Frequently asked questions about equipment loans

Methodology

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To choose the best equipment financing, we researched banks and online lenders that offered term loans, business lines of credit and other loan types. We looked for lenders with relaxed eligibility requirements and programs that are specifically geared toward helping borrowers with lower credit scores. We considered features that make loans affordable and accessible to businesses with different characteristics and needs, including interest rates, whether the loans are secured or unsecured, minimum annual revenue and fees. Additionally, these lenders were evaluated for notable qualities such as funding speed and nontraditional eligibility criteria.
 
When evaluating lenders, we use a 22-point scale to measure quality in five key areas: Accessibility, affordability, transparency, customer service and flexibility. Based on the results, lenders are given a rating between 1 and 5:
 
  • 4.5 or higher: Outstanding
  • 4 to 4.5: Excellent
  • 3.5 to 4: Good
  • 3.5 and under: Average